On November 27, 2017 the Estonian Parliament modified the Anti-Money Laundering Act and Terrorism Finance Act. Operating licenses are therefore issued by the Estonian Financial Intelligence Unit (FIU) – an independent unit operating under the supervision of the Estonian police department and the Border Guard Board.

When applying for a cryptocurrency exchange license in Estonia, the proper application form, along with additional documents and pertaining information, ought to be completed and submitted to the Register of Economic Activities.

Required Documents

As a rule, all the following required documents ought to be authenticated with an apostille.

Certificate of (Non) Conviction from the National Criminal Register for the following: shareholders, board members, ultimate beneficiary owners, management and key personnel.

CV’s of all the above

Present Rules of Procedure for Anti Money Laundering (AML) purposes.

Description of strategic planning

Procedure for Obtaining Estonia Cryptocurrency License

An Estonian company has to be the one conducting the cryptocurrency license application process. Once the registration of Estonian company formation is concluded, a small fee has to be paid; all the aforementioned required documents can then be sent to the Register of Economic Activities.

The Estonian Private Limited company (also known as Osaühing or OÜ) is the prevailing form of business in Estonia. With Osaühing or OÜ, company owners carry no proprietary liability, therefore having no personal responsibility over company debts.

Our company will provide you with all the necessary help throughout the cryptocurrency license application process, gathering the legal documentation and submitting the application form in an orderly and efficient manner. Once the application was processed by the Register of Economic Activities—and after we retrieve all legal documentation back to your possession—it takes an additional week for the Register to bring their database up to date, presenting the new shareholder(s), board member(s) and relevant company information.

Company registration in Estonia – Additional Information to Be Taken in Consideration when:

With any private limited liability company that is established in Estonia there is a requirement for a share capital of minimum of 2500 EUR. Additionally, a private limited company that is established in Estonia may not sell its shares to the public.

Since the prevailing form of business in Estonia is private limited liability company, shareholder(s) or founder(s) have no proprietary liability, or, in other words, no personal responsibility, over company debts. The financial liability of the company’s shareholders amounts to a fixed sum – commonly established in accordance to that person’s investment in the company.

If the Estonian company has a VAT ID or uses regular salary payments, monthly accounting is in order. Under any other conditions, a submission of an annual report is sufficient – submitted within 6 months after the end of the fiscal year.

There can be either one or more founders or shareholders of a private limited company that is established in Estonia, having the status of either a resident or a non-resident of the Republic of Estonia.

Estonian company formation documents must all be signed before a notary and in the presence of the company’s Board of directors and its founders.

The company’s Board of Directors can consist of one or more members, who must be “natural persons”. Members of the management board are not required to additionally be part of the company’s shareholders. However, it is mandatory that at least 50% of the management board members will be resident of the European Union, Switzerland, Norway, Iceland or Lichtenstein.

According to Estonian regulations, any private limited company ought to have a supervisory board, when its share capital is larger than 25,000 EUR, the company’s management board has less than three members, or, if such specification appears in the company’s articles of association.

Requirements for Obtaining a Cryptocurrency Exchange License Estonia

Regardless of the jurisdiction you plan on operating under you will need to obtain a cryptocurrency license in that jurisdiction. No matter where you obtain your license you will be required to supply the local financial services authorities with the relevant documents. We have listed the basic requirements for obtaining a Bitcoin license including corporate and personal documents.

You will need to supply:

A comprehensive business plan including all aspects of planned endeavors for the coming two years; the scope of the activities and the planned means to be employed in carrying out these projects.

A detailed description of operational, risk and compliance software.

Background information/CV for the principals of the company

Specifics about the source of invested capital

Website address

Legal documents of each of the company’s principals including: notarized copies of passports, latest utility bills, Police Clearance Certificates and other personal documents of the company owners.

Advantages of a Regulated Cryptocurrency Company

Transparency – No matter where your company is registered the jurisdiction regulators keep a record of all company operations including liquidity, legal status and more. Crypto Bitcoin traders can easily go online and verify the legitimacy of your company and check that it has no previous serious disputes with clients or the regulators or hidden agendas.

Security – Bitcoin licensed businesses are required to protect their clients’ funds by holding them in segregated accounts, independent from the company corporate bank account. By taking this precaution the company insures that:

Clients’ funds are protected and the company will not be able to close their business and abscond with the clients’ funds.

The company is unable to use clients’ funds interchangeably – transferring one client’s funds to another client’s account.

Increased Credibility – A company holding a cryptocurrency license from a reputable jurisdiction is conceived as more reliable and credible. Traders and employees alike view a licensed cryptocurrency company as more trustworthy.

Dispute Center – Licensed cryptocurrency companies have to abide by the rules and regulations of the jurisdiction where they were registered. In the event of a dispute arising the regulator will investigate the complaint against the Cryptocurrency company and decide if the complaint is justified. If the complaint is found to have merit this can affect the status of the company’s license and even, in some cases lead to sanctions, fines and the cancelation of the broker’s license.

Gibraltar to be one of the First Jurisdiction to Establish a Regulatory Frame for the Cryptocurrency Industry

Recently Gibraltar’s Financial Services Commission has announced that the jurisdiction plans to legislate regulations pertaining to the cryptocurrency industry. The new legislation will cover commercial use of DLT (Distributed Ledger Technology) for transmitting and storing of “value” (including cryptocurrencies). The new laws will apply to activities not covered by other forms of regulation including storage of digital assets for others, mining and exchanges. The first phase of the new legislation will come into effect in January 2018. During the coming year additional legislation will be introduced covering companies offering ITO/ICO/Crowdfunding investment opportunities.

It is important to remember that license application is a complex process and successful obtainment of a license is not guaranteed.

Note: Companies applying for a cryptocurrency license must be a resident company and abide by the principles of transparency. Companies must also have a legitimate technical background and business history to meet the “fit and proper” assessment test.

Cryptocurrency Exchange Business in Estonia

Two central factors should be taken in consideration when starting a Cryptocurrency business. First, while this business model has increasingly become prevalent in recent years, many countries officially proscribe it. Second, opening a Cryptocurrency business requires ample work and resources: one has to raise sufficient startup-capital; attend matters of regulation, taxation and compliance by employing the proper staff members; hire customer support team; and attend all aspects of sales and marketing.

Choosing Estonia as the jurisdiction for starting your Cryptocurrency operation should ameliorate the hardships of starting a new business. Estonia—a country that openly supports technological innovation and digital entrepreneurship—issues a specific license to those wishing to operate a Cryptocurrency business within its jurisdiction. As reflected in Estonia’s straightforward licensing process, legalizing your business clears any ambivalence that, otherwise, would have been girding your business. Yet the legalization of your Cryptocurrency business also necessitates an ongoing contact with the Estonian authorities. Fortunately, Estonian regulators are amenable and ready to assist.

Cryptocurrency Exchange License in Estonia – Under the Money Laundering and Terrorist Financing Prevention Act, operating a cryptocurrency exchange business in Estonia necessitates that you have an activity license. Such license is issued by the Estonian Financial Intelligence Unit, a regulatory office that not only supervises the licensing process—issuing an indefinite license—but, further manages the prevention of money laundering and financial terrorism in the country.

Generally speaking, there are two compulsory preconditions for submitting a license application. First, there can be no unexpired penalty for a criminal offense against the business’ top members (the owner, procurator and/or board members). Second, having no Estonian residency, the owner of the business has to submit his/her criminal record for inspection. Documentation concerning all relevant criminal record checks, along with contact information, the business’ KYC/AML procedures, some additional data and paid fee of 345 Euros will then be submitted to the Estonian Financial Intelligence Unit for examination and approval – a process that can take up to 30 days.

What is ICO?

Putting it plainly, initial Coin Offerings (ICO) are means for cryptocurrency entrepreneurs to raise initial capital for a new venture, without having to lose any share of the company to either the bank or other venture capitalist investors.

In order to procure ICO, a cryptocurrency business capitalist should produce a “white paper” – a document which outlines the new business. Without being given any portion of the company, and based solely on the prediction that the business should increase its worth, people are then asked to transfer digital funds (Bitcoin, fiat or Ether) and support the new enterprise. Since there is still little regulation over ICO’s, investing in them can be precarious as one is prone to become a victim of various scams.

Estonia—a country which promotes a model of technological innovation and digital entrepreneurship—however, has enacted a policy purposed to facilitate trustworthy ICO’s. Furthermore, Estonia has launched its own crypto token, the estcoin, as a digital token whose value is fixed.

Cryptocurrency Legislation in Estonia

While cryptocurrency businesses have become a worldwide trend, little regulation also made this business somewhat risky and prone to money laundering offenses. On October 26, 2017—in effort to promote cryptocurrency businesses and welcome foreign digital entrepreneurship into the country—Estonian regulators issued a new Money Laundering and Terrorist Financing Prevention Act. This new law in fact determines that cryptocurrency businesses are lawful businesses which are therefore monitored and protected by the Estonian Financial Intelligent Unit.

Most prominently, the new law stipulates who might serve as an ultimate beneficial owner of a cryptocurrency business in Estonia, further specifying new licensing requirements. Amongst other provisions of the new law, it mandates that cryptocurrency businesses ought to present solid risk management policies; allow remote identification of clients – information that can be transferred to a certified third party; and expect colossal fines in cases of non-compliance.

Estonia’s Business Formation

Unlike many other countries, and with no legislative bias against foreign entrepreneurs, Estonia enables foreigners to register their business in Estonian jurisdictions. For that purpose, foreign investors are unprecedentedly allowed to register as digital residence, using the Estonian e-residency program.

Having an e-residency than allows you to legally register your business. Operating a legal business in Estonia requires one to procure a share capital of 2,500 Euro and register the company with the Commercial Register of Estonia; registration fees amount to 145 Euro. Private Limited Liability Company is the most prominent and simplest business formation in Estonia. Consequently, an expedited registration procedure is made possible. Note that if your company’s annual taxable turnover is expected to exceed 16,000 Euro, than it is advisable to register your company for VAT.

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